This course will provide delegates with an in depth understanding of the more advanced properties of equity derivatives and risk management. The course starts with exchange traded and OTC equity delta one products and progresses on to equity option trading applications and equity option risk management.
- Case studies and illustrations are used to demonstrate the product applications
- A fundamental knowledge of equity derivative products
This course will enable you to:
- To provide an understanding of the trading and settlement mechanisms for
exchange-traded index futures and OTC forward contracts
- Describe how equity delta one products are used for trading and hedging
- Demonstrate how fair futures prices can be derived and the residual risks in trade execution
- Explore the main option trading strategies and how they are used in practice
- To provide an intuitive understanding of option valuation
- Explore the option risk metrics the Greeks in more detail and how traders manage the primary market risks
- Understand the importance of volatility to the options market
This virtual course is one of the ICE Education LIVE programs. We provide two phases to the course:
1. Live Virtual Sessions: Trainer led live video sessions (as per the outline below). These are short focused sessions with practical activity and interaction throughout.
2. Post-course: The live video clinic session is scheduled for one week post course for any learning points you'd like to revisit.
All course payments must be received one day prior to the start date
|Price||£895 + VAT|
Who Should Attend
This course is aimed at anyone with an interest (whether direct or indirect) in the trading of fixed income derivatives. Delegates may include not only traders but also related functions including risk management, oversight and mid-office roles.
Session 1: Equity Delta One Products
o Equity forwards the OTC products
o What are they and why trade them?
o Equity forward pricing and the cost-of-carry components
o Execution risk and mark-to-market valuation
- Stock index futures the exchange traded products
o Contract specifications and the fair value in index futures price
- What is the basis? What drives the basis? How to trade the basis?
o Practical issues execution, rollover and liquidity risks (including volume and open interest) and the impact from delta hedging and arbitraging activities
o Hedging and index arbitrage
o Beta-adjusted hedging
o The challenges of index arbitrage
Session 2: Equity Options
- Options fundamentals and terminology check
o How do options compare to futures?
- Understanding the intrinsic value and moneyness of an option
o The option premium as a function of intrinsic value and time value
- What drives the option price?
o What are the inputs and where do they come from?
o How is the price justified?
- Option strategies and applications
o Using option combinations to create specific payoff profiles
o What are the clients motivations behind option combos?
o Protective strategies using puts
o Enhanced income strategies using calls
o Subsidising option costs using spreads and collars
o Taking a view on volatility using straddles and strangles
Session 3: Equity Option Risk Management
- How do traders and investors manage their risks?
o Understanding the risk metrics the Greeks
- What are the most important first-order risks?
o Delta, vega and theta
- Delta as a measure of the probability of exercise
o How traders manage the market risks
o What is meant by delta long, delta short, delta neutral
o Hedging the portfolio delta and risk exposure
- Gamma as the rate of change of delta
o The fundamental importance of gamma/convexity
o Gamma risk and neutralising gamma risk
o Long/short theta and vega